GM profit beats expectations

By Ben Klayman and Deepa Seetharaman

DETROIT (Reuters) - General Motors Co posted a higher-than-expected second-quarter profit on Thursday as aggressive cost-cutting helped the U.S. automaker narrow its losses in Europe.

Higher prices on new models such as the 2014 Chevrolet Silverado pickup truck and Impala large sedan boosted results in its core North American market. Executives said those results will improve further in the second half thanks to other new high-margin vehicles.

“The biggest news in the quarter is just Europe is not as bad,” said Guggenheim Securities analyst Matthew Stover, who has a “neutral” rating on GM’s stock.

Europe, where auto industry sales hit a 20-year low in the first half, remains “very challenging,” GM Chief Financial Officer Dan Ammann said. He added it was too soon to call any sort of improvement there.

That was in marked contrast to U.S. rival Ford Motor Co , which on Wednesday reported a smaller-than-anticipated loss in Europe and said the region could be stabilizing.

GM executives aren’t ready to go that far. “A demand-driven recovery (in Europe) isn’t in sight yet,” GM Chief Executive Dan Akerson said on a conference call.

GM’s North American business had operating earnings of almost $2 billion in the latest quarter, easily beating the $1.75 billion that nine analysts polled by Reuters had expected.

GM was able to get better pricing in North America, accounting for an earnings gain of $300 million. That was offset by a $400 million increase in costs related mostly to the introduction in June of the 2014-model Chevrolet Silverado and GMC Sierra trucks, key profit generators for the company.

Akerson said the launch of the new trucks, which went on sale in June, has gone well and the timing was perfect, given the recovering U.S. housing market. Officials said it was too early to say whether continued strong demand for the 2013-model trucks could result in even better pricing than GM initially thought for the new models.

Costs associated with the truck launch will ease in the fourth quarter and into next year, GM said.

The company’s international operations, which include China, reported a disappointing second-quarter profit of $228 million, down 64 percent from a year earlier.

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